Federal Bank to buy more mortgage loans from markets

The bank bought the Rs 1,300-crore portfolio from a triple A-rated NBFC, which will minimise the risk of defaults.

Having already bought Rs 1,400 crore of mortgage portfolio in the first half of this financial year, Federal Bank on Wednesday said it will continue with such purchases and is closing in on another transaction. The bank purchased a Rs 100-crore portfolio from a non-banking lender in the June quarter and followed it up with another Rs 1,300-crore deal in the following quarter.

“We are working on another such transaction and the amount is meaningfully high, if not as big as the previous one,” managing director and chief executive Shyam Srinivasan told reporters here.

He explained that apart from giving a spread on the margin, such purchases of portfolios help the lender in building newer customer relationships.

He also said that the dearth of capital in many lending entities and the bank’s comparatively stronger buffers are resulting in such deals.

The bank bought the Rs 1,300-crore portfolio from a triple A-rated NBFC, which will minimise the risk of defaults.

It posted a retail loan growth of 21.7 per cent for the reporting quarter, which would shoot up to 27 per cent if the portfolio buy is also included.

The Kochi-based bank, which reported a 24.77 per cent rise in net income for the September quarter at Rs 201.24 crore, also hinted that the worst is over with NPAs as fresh slippages came down to a six-quarter low of Rs 268 crore.

Srinivasan said only two chunky accounts — a Rs 278 crore exposure to Air India and a Rs 150 crore to a metals company — will be coming out of a moratorium arrangement fixed as part of a restructuring exercise in the next few quarters.

Of the two accounts, he exuded confidence about Air India saying it is doing good and shall be able to meet its commitments.

Meanwhile, on the two-fold rise in provisions in the September quarter at Rs 168.40 crore, Srinivasan explained that it is due to a rise in standard asset provisioning on its book expansion and also due to a couple of S4A accounts which requires banks to set aside a fifth of the total exposure.

Going forward, the bank will focus on the mid corporate segment which is not able to get required funding from the lenders, Srinivasan said, adding, the book will be evenly split between the wholesale, SME and retail segments.

It is also gradually planning to increase its credit deposit ratio to 80 per cent, which it feels is the optimum utilisation of resources, executive director Ashutosh Khajuria said.

The bank scrip, which had gained by over 8 per cent following the results yesterday, closed Wednesday’s session up 1.05 per cent at Rs 82 on the BSE as against a 0.91 per cent correction in the benchmark Sensex.